The Threats of Business and the Business of Threats

A protester carries a "United Corporations of America" flag at an anti-war rally in Washington, DC. (Photo: ragesoss/Flickr.)

More and more, we hear that nothing can be done to tax major corporations because of the threat of how they would respond. Likewise, we cannot stop their price gouging or even the government subsidies and tax loopholes they enjoy. For example, as the oil majors reap stunning profits from high oil and gas prices, we are told it is impossible to tax their windfall profits or stop the billions they get in government subsidies and tax loopholes. There appears to be no way for the government to secure lower energy prices or seriously impose and enforce environmental protection laws. Likewise, despite high and fast rising drug and medicine prices, we are told that it is impossible to raise taxes on pharmaceutical companies or have the government secure lower pharmaceutical prices. And so on.

Such steps by "our" government are said to be impossible or inadvisable. The reason: corporations would then relocate production abroad or reduce their activities in the US or both. And that would deprive the US of taxes and lose more jobs. In plain English, major corporations are threatening us. We are to knuckle under and cut social programs that benefit millions of people (college loan programs, Medicaid, Medicare, Social Security, nutrition programs, and so on). We are not to demand higher taxes or reduced subsidies and tax loopholes for corporations. We are not to demand government action to lower their soaring prices. And if we do, corporations will punish us.

Three groups deliver these business threats to us. First, corporate spokespersons, their paid public relations flunkies, hand down the word from on high (corporate board rooms). Second, politicians afraid to offend their corporate sponsors repeat publicly what corporate spokespersons have emailed to them. Finally, various commentators explain the threats to us. These include the journalists lost in that ideological fog that always translates what corporations want into "common sense." Commentators also include the professors who translate what corporations want into "economic science."

Of course, there are always two possible responses to any and all threats. One is to cave in, to be intimidated. That has often been the dominant "policy choice" of the US government. That's why so many corporate tax loopholes exist, why the government does so little to limit price increases, why government does not constrain corporate relocation decisions etc. No surprise there, since corporations have spent lavishly to support the political careers of so many current leaders. They expect those politicians to do what their corporate sponsors want. Just as important, they also expect those politicians to persuade people that its "best for us all" to cave in when corporations threaten us.

What about the other possible response to threats? Government could make a different policy choice, define differently what is "best for us all." In plain English, it could persevere in the face of business threats and to do so, it could counter-threaten the corporations. When major corporations threaten to cut or relocate production abroad in response to changes in their taxes and subsidies or demands to cut their prices or serious enforcement of environmental protection rules, the US government could promise retaliation. Here's a brief and partial list of how it might do that (with illustrative examples for the energy and pharmaceutical industries):

Inform such threatening businesses that the US government will shift its purchases to other enterprises.

Inform them that top officials will tour the US to urge citizens to follow the government's example and shift their purchases as well.

Inform them that the government will proceed to finance and organize state-operated companies to compete directly with threatening businesses.

Present and promote passage of new laws governing enterprise relocation (giving local, regional and national authorities veto power over corporate relocation decisions).

Purchase energy and pharmaceutical outputs in bulk for mass resale to the US public, passing on all the savings from bulk purchases.

Seize assets of enterprises that seek to evade or frustrate increased taxes or reduced subsidies.

Laws enabling such actions either already exist in the US or could be enacted. In other countries today, existing models of such laws have performed well, often for many years. These could be used and adjusted for US conditions.

Of course, a much better basis than threat and counter-threat is available for sharing the costs of government between individuals and businesses. That basis would be achieved by a transition to an economic system where workers in each enterprise functioned collectively and democratically as their own board of directors. Such worker-directed enterprises eliminate the basic split and conflict inside capitalist corporations between those who make the key business decisions (what, how and where to produce, for example) and those who must live with and most immediately depend on those decisions' results (the mass of employees).

One concrete example can illustrate the benefits of this alternative to the threat-counter-threat scenario. Corporations have used repeated threats (to cut or move production) as a means to prevent tax increases and to secure tax reductions. Likewise they have made the same threats to secure desired spending from the federal government (military expenditures, federal road and port building projects, subsidies, financial supports, and so on). In effect, corporate boards of directors and major shareholders seek to shift tax burdens onto employees. Their success over the last half-century is clear. Tax receipts of the US government have increasingly come (1) from individual rather than corporate income taxes and (2) from middle and lower individual income groups rather than from the rich. In worker-directed enterprises, the incentive for such shifts would vanish because the people who would be paying enterprise taxes are the same people who would be paying individual income taxes. Taxation would finally become genuinely democratic. The people would collectively decide how to distribute taxes on what would genuinely be their own businesses and their own individual incomes.

Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne). His work is available at rdwolff.com and at democracyatwork.info.

The Threats of Business and the Business of Threats

A protester carries a "United Corporations of America" flag at an anti-war rally in Washington, DC. (Photo: ragesoss/Flickr.)

More and more, we hear that nothing can be done to tax major corporations because of the threat of how they would respond. Likewise, we cannot stop their price gouging or even the government subsidies and tax loopholes they enjoy. For example, as the oil majors reap stunning profits from high oil and gas prices, we are told it is impossible to tax their windfall profits or stop the billions they get in government subsidies and tax loopholes. There appears to be no way for the government to secure lower energy prices or seriously impose and enforce environmental protection laws. Likewise, despite high and fast rising drug and medicine prices, we are told that it is impossible to raise taxes on pharmaceutical companies or have the government secure lower pharmaceutical prices. And so on.

Such steps by "our" government are said to be impossible or inadvisable. The reason: corporations would then relocate production abroad or reduce their activities in the US or both. And that would deprive the US of taxes and lose more jobs. In plain English, major corporations are threatening us. We are to knuckle under and cut social programs that benefit millions of people (college loan programs, Medicaid, Medicare, Social Security, nutrition programs, and so on). We are not to demand higher taxes or reduced subsidies and tax loopholes for corporations. We are not to demand government action to lower their soaring prices. And if we do, corporations will punish us.

Three groups deliver these business threats to us. First, corporate spokespersons, their paid public relations flunkies, hand down the word from on high (corporate board rooms). Second, politicians afraid to offend their corporate sponsors repeat publicly what corporate spokespersons have emailed to them. Finally, various commentators explain the threats to us. These include the journalists lost in that ideological fog that always translates what corporations want into "common sense." Commentators also include the professors who translate what corporations want into "economic science."

Of course, there are always two possible responses to any and all threats. One is to cave in, to be intimidated. That has often been the dominant "policy choice" of the US government. That's why so many corporate tax loopholes exist, why the government does so little to limit price increases, why government does not constrain corporate relocation decisions etc. No surprise there, since corporations have spent lavishly to support the political careers of so many current leaders. They expect those politicians to do what their corporate sponsors want. Just as important, they also expect those politicians to persuade people that its "best for us all" to cave in when corporations threaten us.

What about the other possible response to threats? Government could make a different policy choice, define differently what is "best for us all." In plain English, it could persevere in the face of business threats and to do so, it could counter-threaten the corporations. When major corporations threaten to cut or relocate production abroad in response to changes in their taxes and subsidies or demands to cut their prices or serious enforcement of environmental protection rules, the US government could promise retaliation. Here's a brief and partial list of how it might do that (with illustrative examples for the energy and pharmaceutical industries):

Inform such threatening businesses that the US government will shift its purchases to other enterprises.

Inform them that top officials will tour the US to urge citizens to follow the government's example and shift their purchases as well.

Inform them that the government will proceed to finance and organize state-operated companies to compete directly with threatening businesses.

Present and promote passage of new laws governing enterprise relocation (giving local, regional and national authorities veto power over corporate relocation decisions).

Purchase energy and pharmaceutical outputs in bulk for mass resale to the US public, passing on all the savings from bulk purchases.

Seize assets of enterprises that seek to evade or frustrate increased taxes or reduced subsidies.

Laws enabling such actions either already exist in the US or could be enacted. In other countries today, existing models of such laws have performed well, often for many years. These could be used and adjusted for US conditions.

Of course, a much better basis than threat and counter-threat is available for sharing the costs of government between individuals and businesses. That basis would be achieved by a transition to an economic system where workers in each enterprise functioned collectively and democratically as their own board of directors. Such worker-directed enterprises eliminate the basic split and conflict inside capitalist corporations between those who make the key business decisions (what, how and where to produce, for example) and those who must live with and most immediately depend on those decisions' results (the mass of employees).

One concrete example can illustrate the benefits of this alternative to the threat-counter-threat scenario. Corporations have used repeated threats (to cut or move production) as a means to prevent tax increases and to secure tax reductions. Likewise they have made the same threats to secure desired spending from the federal government (military expenditures, federal road and port building projects, subsidies, financial supports, and so on). In effect, corporate boards of directors and major shareholders seek to shift tax burdens onto employees. Their success over the last half-century is clear. Tax receipts of the US government have increasingly come (1) from individual rather than corporate income taxes and (2) from middle and lower individual income groups rather than from the rich. In worker-directed enterprises, the incentive for such shifts would vanish because the people who would be paying enterprise taxes are the same people who would be paying individual income taxes. Taxation would finally become genuinely democratic. The people would collectively decide how to distribute taxes on what would genuinely be their own businesses and their own individual incomes.

Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne). His work is available at rdwolff.com and at democracyatwork.info.